Autumn Statement: 6 major changes affecting small businesses

The Autumn Statement has closed and there was not a whole lot for small businesses and entrepreneurs. However, we have gone through the blue book with the finest of fine tooth-combs and dug the following out.

Business rates

There were fears in the SME community that Small Business Rate Relief will be scrapped entirely, but an extension for 12 months to April 2017 was announced, helping the nation’s smallest firms to pay less tax on their premises.

Close to 405,000 of the smallest businesses will continue to receive 100% relief from business rates, with around 200,000 businesses will benefit from tapering relief. The government has however delayed revealing the findings of its review into business rates until next year’s budget.

Entrepreneurs Relief

Despite the rumours, entrepreneurs will be pleased to know that there won’t be any changes to Entrepreneurs’ Relief (ER). Even those entrepreneurs that might have been caught by the changes to ER made way back in the Summer Budget will be relieved to learn that the government will bring forward legislation, introduced by the Finance Act 2015, which will enable the relief to still be available on certain genuine commercial transactions.

As things stand now, Entrepreneur’s Relief will allow businesses to apply for tax relief up to £10 million lifetime allowance. This can save entrepreneurs up to £1.8m of capital gains tax on a £10m disposal of shares in a qualifying trading business.

New digital tax accounts

Digital tax is one area that is set to become part of a ‘reformed and modern state’. It was revealed that UK's small businesses and self-employed individuals will possess their digital identities by 2017, with a £1.3bn investment to “transform HMRC into one of the most digitally advanced tax administrations in the world”.

Osbourne said, “We’re going to build one of the most digitally advanced tax administrations in the world. So that every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online.”

We think this could increase the burden on small businesses as it will initially add another layer of red tape with businesses requiring assistance four times a year instead of once. Moreover, it will present challenges to bigger businesses with complex tax affairs.

Employees and pensioners won’t be part of the ‘modern and reformed’ digital tax world unless they have another source of income that pays them over £10,000 a year.

Regional enterprise zones

The Chancellor announced plans to create new enterprise zones, taking the total to 26 across the UK. The chancellor named 15 new zones in his Autumn Statement including towns like Dorset and Carlisle. As part of the Government's Northern Powerhouse promise, more than a third of all the new zones will be in the North of England.

According to government data, since April 2012, Enterprise zones have supported over 540 businesses, attracting over £2.2bn pounds of private sector investment and helping to create 19,000 jobs.

Investments in new energy sector

Businesses that operate in the green sector will be happy to know that investments in new energy infrastructure will drive growth for SMEs and help create jobs in the renewables sector. Additionally, the government has started consultations on changes to the Renewables Obligation and Feed in Tariff schemes, proposals for which will be published shortly. If accepted, an average small business will save £500 on their energy bills in 2020-21.

Additionally, if the planned September 2015 fuel duty increase is cancelled, it will save a small business with a van £1,357 by the end of 2015-16.

6bn business 'payroll tax'

However, not all is good news. Businesses have been left reeling after the announcement of £11.6bn “payroll tax”; from April 2017 companies will be charged 0.5% of their payroll toward apprenticeship levy. This will raise roughly £3bn a year for the following four years. However, each employer will receive an allowance of £15,000 to offset against their levy payment and this means that the levy will only be paid on any paybill in excess of £3million. It is estimated that less than 2% of employers will have to pay it but this could affect employers of as few as 100 people.

What we think

Largely small businesses have a lot to cheer about in the Autumn Statement, especially with the exemption given over apprenticeship levy and the small business rate relief that will be extended to over 600,000 firms. However, we would like to see the chancellor provide more tax breaks and support for small businesses.

For more on general tax measures announced in the Autumn Statement, we will be producing a report later today. To follow our commentary, please visit our Twitter page or use the hashtag #AutumnStatement to find out more.